The Hazel8 development in Cleveland's University Circle neighborhood is one of several apartment projects underway in the region. Peggy Turbett, The Plain Dealer

CLEVELAND, Ohio -- The business of buying, selling and constructing buildings, from apartments to offices, will continue its modest recovery in 2013, according to a highly regarded forecast out Wednesday.

But perceptions of limited opportunities keep dogging Cleveland, which ranked near the end of a list of 51 cities in the report. The forecast, prepared by the nonprofit Urban Land Institute and audit firm PwC, is based on surveys of more than 900 real estate professionals.

After several rough years, the commercial real estate industry is showing tempered enthusiasm about the future. But nobody's predicting a sharp rebound for a business that relies on job creation to fill workplaces, homes and hotel rooms. And the slow, steady recovery still faces economic headwinds, from Europe's turmoil to this country's struggles to manage its debt.

U.S. occupancy rates, rents and real estate prices should inch up next year, the report states.

Apartments remain the industry darling, helped along by the housing crisis, young renters, aging Baby Boomers and population shifts toward urban areas. Investors also showed more confidence about industrial buildings. Hotels followed, trailed by offices and retail, based on their prospects to attract investment and development.

The Flats East Bank project, on the Cuyahoga River, includes an 18-story office tower and a 150-room hotel. Peggy Turbett, The Plain Dealer

Researchers expect more money to trickle down to secondary cities like Cleveland, as competition and real estate prices rise in the most bustling, coastal markets. Yet the survey indicates that a broad slice of the industry still sees Cleveland, and much of the Midwest, as fly-over country.

"It's a perception thing, not a scientific, analytical analysis," said Stephen Blank, the Urban Land Institute's senior fellow for real estate finance.

To a degree, those perceptions are based on statistics, including the region's population loss, low education levels and longtime struggles to remake an economy built on manufacturing. But, Blank added, "Cleveland has all the characteristics to change people's perceptions. Obviously, the facts are not getting out."

The region's apartment vacancy level is approaching 3.9 percent -- a 15-year low, according to Marcus & Millichap Real Estate Investment Services. After years of stagnation, rents are rising, particularly in downtown Cleveland.

"There are more projects in the works now than there have been for many years," said Michael Barron, who handles apartment deals for Marcus & Millichap's local office. "But I don't think we'll see overbuilding anytime soon."

The new corporate headquarters of eBook distributor OverDrive Inc. in Garfield Heights, includes industrial space and offices.Peggy Turbett, The Plain Dealer

On the industrial side, Northeast Ohio outshines the nation, with a vacancy rate between 7 and 8 percent.

"Manufacturing has definitely rebounded," said George Pofok, a senior vice president with Cresco Real Estate in Independence. "With the lack of product on the market, or the limited amounts in certain product types, at some point it's got to break loose. But the cost of new construction scares people."

Offices are still a tough spot, with a region-wide vacancy rate around 20 percent. Many recent office transactions involved financially distressed properties or buildings slated for conversion to another use, like housing.

"Office just continues to be one sector that's lagging," said Alec Pacella of the NAI Daus brokerage in Beachwood. "Not that the other ones are shooting the lights out, but that one is clearly the caboose of the train."

But vacancy is dipping, particularly at the best buildings. And office tenants are showing more interest in downtown Cleveland.

Meanwhile, retail deals are brewing, on the small and grand scale. Restaurant chains including Jack in the Box and Piada, which bills itself as Italian street food, are eyeing the region.

Parmatown Mall, one of Northeast Ohio's largest shopping centers, changed hands Tuesday and is slated for redevelopment. Peggy Turbett, The Plain Dealer

And recent ownership changes at major properties like SouthPark Mall in Strongsville -- an investment opportunity -- and Parmatown Mall -- a redevelopment project -- indicate that retail investors see the potential to make money in densely populated suburbs.

"I'm significantly more optimistic than that report would say about the retail prospects of Northeast Ohio," said Keith Hamulak of the CBRE Group Inc. brokerage, which is leasing space at SouthPark for Starwood Retail Partners, a Chicago-based investor that bought the mall in June.

Reid Brown | The Plain Dealer

Northeast Ohio's economy, and its real estate market, have ample room for improvement. But the region's prospects aren't as dim as national reports portray them, said Bob Nosal, executive managing director of the Newmark Grubb Knight Frank brokerage in Cleveland.

"This is characteristic," Nosal said of Cleveland's low ranking. "But many of the developments and the things that are happening here, particularly downtown, are not getting notoriety or haven't hit the radar screen yet. And in some cases, because they're projects coming online in 2013 and 2014, their impact hasn't been felt yet."

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